[Analytical Perspectives]
[Other Technical Presentations]
[19. Relationship of Budget Authority to Outlays]
[From the U.S. Government Printing Office, www.gpo.gov]
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19. RELATIONSHIP OF BUDGET AUTHORITY TO OUTLAYS
Budget authority is the authority provided by law to incur financial
obligations that will result in outlays. \1\ Budget authority must be
provided in laws, in accordance with Article I, Section 9, of the
Constitution: ``No money shall be drawn from the Treasury, but in
Consequence of Appropriations made by Law...'' Hence, Federal agencies
cannot obligate the Government to make outlays until budget authority
has been provided to them by appropriation.
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\1\ The relationship of budget authority, obligations, and outlays is
discussed generally in Chapter 24 of this volume, ``Budget System and
Concepts and Glossary''; for most individual budget accounts, this
relationship is traced in a ``program and financing'' schedule [table]
in the budget Appendix volume.
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New budget authority for most Federal programs is provided in 13
annually enacted appropriations acts. \2\ However, new budget authority
for more than half of all outlays is made available through permanent
appropriations under existing laws. These permanent appropriations take
three main forms. The first is budget authority for trust funds, which
for most trust funds is automatically appropriated under existing law
from the available balance of their receipts and equals the estimated
annual obligations of the funds. The second is interest on the public
debt, for which budget authority is automatically provided under a
permanent appropriation enacted in 1847 and equals interest outlays. The
third is the authority to spend offsetting collections credited to
appropriation or fund accounts.
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\2\ Some or all of the 13 ``regular'' appropriation bills have
sometimes been consolidated into a few acts or a single act.
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Not all of the new budget authority for 2004 will be obligated or
spent in 2004: \3\
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\3\ This subject is also discussed in a separate OMB report,
``Balances of Budget Authority,'' which can be purchased from the
National Technical Information Service shortly after the budget is
transmitted and is available on the internet, with the other budget
documents.
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Budget authority for most trust funds comes from the
authority of these funds to spend their receipts (limited, in
most cases, by the estimated obligations). Any unexpended
balances remain available to these trust funds indefinitely in
order to finance benefits and for other purposes specified by
law.
Budget authority for most major construction and procurement
projects covers the entire cost estimated when the projects
are initiated, even though work will take place and outlays
will be made over a period extending beyond the year for which
the budget authority is enacted.
Until the 1998 budget, budget authority for large portions
of the subsidized housing programs was equal to the
Government's estimated obligation to pay subsidies under
contracts, which extended for periods of up to 40 years. New
budget authority is now appropriated year-by-year for renewal
of these contracts as they expire. For many years into the
future, however, some of the outlays under these programs will
continue to originate from budget authority enacted in 1997
and earlier years.
New budget authority for most other long-term contracts
covers the estimated maximum obligation of the Government.
Budget authority for most education and job training
activity is appropriated for school or program years that
begin in the fourth quarter of the fiscal year. Most of these
funds result in outlays in the year after the year of
appropriation.
Government enterprises are occasionally given budget
authority for standby reserves that will be used only in
special circumstances.
As a result of these factors, a substantial amount of budget authority
carries over from one year to the next. Most of this is earmarked for
specific uses and is not available for new programs. A small part may
never be obligated or spent, primarily the amount for contingencies that
do not occur or reserves that never have to be used. Also, some budget
authority results in an exchange of assets for which no corresponding
outlays are scored; budget authority backing International Monetary Fund
arrangements to resolve international monetary crises is an example.
As shown in the following chart, $421 billion of the outlays in 2004
(19 percent of the total) will be made from budget authority enacted in
previous years. At the same time, $436 billion of the new budget
authority proposed for 2004 (19 percent of the total amount proposed)
will not lead to outlays until future years. Although outlays in 2004
are, coincidentally, very nearly equal to budget authority for that year
(99.4 percent), this coincidence only occurs because the prior-year
authority that will produce 2004 outlays ($421 billion) nearly equals
the new 2004 authority that will not be spent until future years ($436
billion). Thus, in general, the total budget authority for a particular
year is not directly indicative of that year's outlays, since it
combines various types of budget authority that have different short-
term and long-term implications for budget obligations and outlays.
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